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The 2013-2014 Financial Aid Award Year is just around the corner. Just when you thought you were getting the hang of the rules for Verification in the 2012-2013 award year, the rules are changing again. Are you ready for what the U.S. Department of Education is heralding as “Customized Verification”?

Beginning with the 2013-2014 Institutional Student Information Report (ISIR), the Central Processing System (CPS) will select a student for verification based on the data reported they reported on the FAFSA, and assign that ISIR to a “Verification Tracking Group.” The Financial Aid office will have to verify specific data on the ISIR based on the Verification Tracking Group the applicant’s ISIR has been assigned to.

As the chart (above, right) indicates, there are five Verification Tracking Groups, each with their own “Verification Tracking Flag,” indicating they type of Verification required.

While the official word out of Washington is that ED won’t be providing Sample or Model Verification Worksheets to institutions, opting rather to provide institutions with sample language to help them describe the verification process to their students, Jeff Baker Et Al, seemed to soften their position when called on the carpet by the Financial Aid Community at last week’s FSA Conference in Orlando Florida. Either way, customized verification looks like a win for Financial Aid Officers as it is likely to reduce administrative burden, especially for those students and families using the IRS Data Retrieval tool to complete their FAFSA. Could we be that lucky?

Nope. Think again.

We’ve got two new verification items to contend with. High School Completion Status and Identity / Statement of Educational Purpose. Whaaaaaat? Well, it’s a new set of documents to collect and a new process to follow, but that’s ED for you. Keeping us on our toes. For a complete overview of the changes for verification check out these resources:

A colleague recently encountered an unusual verification scenario. When a student filed head of household on her Federal Income Tax returns and listed her spouse and child in the household size, she decided to examine the situation closer to ensure that all of the information in the file was consistent. She knew that in order to file as head of household, the student generally couldn’t be married and she set out to identify any conflicting information.

When she interviewed the student, she explained that she was married in another country and that although she was a Permanent Resident herself, her husband who was unemployed, was a nonresident alien. Since he didn’t work, he didn’t file taxes. She remarked that she and her husband were not considered married in the United States. This didn’t sound right to the experienced financial aid administrator, so she pulled out good-old IRSPublication 17 to do some research.

You may be able to file as head of household if you meet all the following requirements.

You are unmarried or “considered unmarried” on the last day of the year.

You paid more than half the cost of keeping up a home for the year.

A “qualifying person” lived with you in the home for more than half the year (except for temporary absences such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to love with you.

She reread the first requirement aloud, recalling the student’s similar statement. “You are unmarried or “considered unmarried” on the last day of the year.”

What did that mean?

She read on, eventually finding her answer.

It read:

Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as head of household.

Much to her surprise, the student’s story checked out and she quickly phoned the student to give her the good news. She was excited to tell her all about the exciting guidance she found in IRS Publication 17. When she got around to calling me, we agreed, this was one of those stories for the infamous “book” of financial aid rarities and oddities.

Got a great financial aid related story to tell? Tell us about it below.

Beginning with the 2012-2013 award year, schools will no longer be able to accept a copy of a student’s tax return to complete verification. Under new rules for verification official IRS tax return transcripts will be required instead.

Under certain conditions, an applicant selected for verification will need to submit to the school an official IRS Tax Return Transcript of 2011 tax year information for the applicant, his or her spouse, and his or her parents, as applicable. See DCL GEN-11-13 for a complete listing of such conditions. A transcript is not required to be signed by the tax filer since it originates from the IRS.

Under the new rules, schools will only be required to verify the data selected by CPS. Ed also removed the 30% verification limit and expects targeted verification of error prone data will reduce the burden on aid administrators while strengthening the efficacy of the FSA program. Students who complete the IRS data retrieval through FAFSA on the web will be less likely to be selected for verification as long as they don’t change any information pulled from the IRS.

According to Jeff Baker, speaking at last weeks FSA conference in Las Vegas, the department of education is having some trouble creating a verification worksheet for the up coming award year that will be comprehensive yet still allow aid administrators to verify only the data selected by CPS. He offered reassurance the Ed would ultimately provide additional guidance after the 1st of the year, but made no promises regarding the verification worksheet.

Some aid administrators voiced their frustration with the new rules citing cutbacks at their schools in addition to heavy workloads and asked Ed to move quickly to develop guidance and worksheets. While the 2012-2013 award year doesn’t officially begin until July 1, 2012, students can begin applying as early as January 1, 2012 so aid administrators will need to be ready pretty soon.

While the potential for the new rules to reduce the administrative burden associated with verification exists, aid administrators expect to see more conflicting information such as students filing as married and head of household on their tax return. Administrators are also concerned about the length of time it will take to get a copy of the tax return as Ed will no longer allow schools to make interim Pell disbursements. Unsubsidized Direct Loans and Parent PLUS disbursements will still be allowed.

Like this:

The 2011 Federal Student Aid (FSA) Fall Conference will be held at the MGM Grand Conference Center in Las Vegas, NV. It runs from November 29 through December 4, 2011.

This year’s agenda is packed full of useful sessions like Reporting Gainful Employment to NSLDS, Consumer Information Disclosures, Adding a new program, verification procedures for the 2012-2013 award year, and all sorts of sessions on cash management, COD and reconciliations processes.

Conference materials (PowerPoints etc.) are posted to the website for those who register and these can be valuable reference materials when you return to the office. My advice – plan to be in Las Vegas this year. And if you can’t go, register anyway to take advantage of the session materials once they are posted to the site.

For the last ten years, I’ve worked in higher education. I started out as a Financial Aid Advisor and worked my way up from there. For the last seven years I’ve been working for a mid-sized group of proprietary schools as their Corporate Director of Financial Aid. Until today, I oversaw the administration of their Title IV program across 30 campuses and for more than 10,000 students and I enjoyed every minute of it.

Today, I’m starting a new career as a consultant and blogger. I’ll still be working in the higher education space and of course, specializing in Title IV Administration. Those of you who know me are familiar with the daily FAST FACTS emails I’ve been sending out for a few years now, so if you liked those, you’ll like this blog too. In the coming days you’ll see articles, analysis and most importantly dialogue; all wrapped up into neat little snippets that are just the right size to get you through your morning cup of coffee. I know you’ll like my blog. I’ve got some work to do to get it ready so, check back tomorrow for an update.
Best Wishes,

Peter Terebesi
Be the change you want to see in the world. Make a Great Day!